Correlation Between CarsalesCom and Ross Stores
Can any of the company-specific risk be diversified away by investing in both CarsalesCom and Ross Stores at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CarsalesCom and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Ross Stores, you can compare the effects of market volatilities on CarsalesCom and Ross Stores and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CarsalesCom with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarsalesCom and Ross Stores.
Diversification Opportunities for CarsalesCom and Ross Stores
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CarsalesCom and Ross is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and CarsalesCom is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CarsalesCom are associated (or correlated) with Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of CarsalesCom i.e., CarsalesCom and Ross Stores go up and down completely randomly.
Pair Corralation between CarsalesCom and Ross Stores
Assuming the 90 days horizon CarsalesCom is expected to generate 0.79 times more return on investment than Ross Stores. However, CarsalesCom is 1.27 times less risky than Ross Stores. It trades about 0.16 of its potential returns per unit of risk. Ross Stores is currently generating about 0.07 per unit of risk. If you would invest 2,201 in CarsalesCom on September 2, 2024 and sell it today you would earn a total of 339.00 from holding CarsalesCom or generate 15.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Ross Stores
Performance |
| Timeline |
| CarsalesCom |
| Ross Stores |
CarsalesCom and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarsalesCom and Ross Stores
The main advantage of trading using opposite CarsalesCom and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarsalesCom position performs unexpectedly, Ross Stores can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ross Stores will offset losses from the drop in Ross Stores' long position.| CarsalesCom vs. URBAN OUTFITTERS | CarsalesCom vs. AM EAGLE OUTFITTERS | CarsalesCom vs. ADRIATIC METALS LS 013355 | CarsalesCom vs. MEDICAL FACILITIES NEW |
| Ross Stores vs. Jacquet Metal Service | Ross Stores vs. POWER METALS | Ross Stores vs. Federal Agricultural Mortgage | Ross Stores vs. FIREWEED METALS P |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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